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Did you regret paying your mortgage off early

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  • #31


    for sure, if i wasn’t financially stable, i would be much more interested in hearing about expansion plans.
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    It's kinda funny, because I've gone the opposite direction:  I feel like since I am firm enough at home and in the bank, I can discuss the risk of empire building.

    And, yeah, I totally get the irony associated with that statement in the setting of paying off a low-rate home mortgage.

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    • #32
      Our goals have been to become financially independent and be able to retire early. However, our goals have not been to die with as much money as possible or retire as soon as possible. Hence we saved a lot and lived well below our means until we hit our “number.” Then, since we had, as William Bernstein says, “won the game,” we quickly paid off our remaining mortgage. Now, looking to retire in 3-4 years, we are building up a large cash pile in order to manage any “sequence of return risk” in early retirement. Has this been the best plan to create the most possible wealth? Probably not. Do we sleep well at night? Yes. No regrets paying off the mortgage. But like many previous comments, I think it should probably not come before getting the accumulation phase in order and is more of a later career move.

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      • #33
        I think I dont view mortgages the same way as most people. You never truly own the house, nor would I want to be in the same place forever. It has too high a transaction cost for a forced savings (again, I think of it as a 6% back-end loaded type savings) and you dont actually get anything you didnt already have by paying it off. I dont actually care what people do with their mortgage of course. I dont really view the mortgages as wealth building in any way, houses are consumptive primarily (obviously not the same for rentals, etc...). Its just some view the mortgage with the same kind of fear as credit card and student loan debt, which it isnt of course. You cant sell out or use the asset value to get away from those, those are real nasty true debts.

        The more money I pile up in the bank and as years go by the less Im concerned about anything, as you realize most of these 'fears' are unfounded. Time (inflation and compounding) and earnings will make these things an afterthought. Its really the divergence in the time value of money that makes it hurt so bad early on, and I know most people have not considered it and maybe they would reassess this move if they did. Money is fungible, so I have a hard time with the idea of people worrying about a mortgage with several times their mortgage in the bank account, makes no sense. I always refer to the 30y rolling market returns vs 30y or 1/2/3% inflation on a $1 when thinking about this. The dollar goes in one end and has two paths it can take, the invested and increased purchasing power or the inflation where its value is destroyed over time. This obviously moves from one end of the spectrum to the other as time goes on and you have less time to compound, so of course preferences would change over time.

        I just hope the banter on here gets people thinking about the timing and what makes sense to them. Early stage physicians should be concerned with gross accumulation, paying down mortgages at what is now historically low rates makes no sense whatsoever in the first 5 years. Fill up retirement accounts and pay down student loans. After a nice little nest egg is started then thinking about the mortgage makes more sense, but is more of a late stage move IMO of course.

        The much more concerning issue to me and the reality for most here especially if we are talking about the FIRE crowd is longevity risk, and the cost of health care and that associated with childrens education, etc...We dont really know how much this would cost and any extra little buffer makes would be appreciated of course. All about balancing probability and trade offs. If Im retired I wouldnt mind a smaller home base and just free to roam wherever, not stuck in one spot until the body makes me. Maybe not owning any home at that time. I'd be fine in an apartment that I owned renting out other units where cash flow makes the situation overall positive.

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        • #34




          The topic of paying a home mortgage off early versus investing gets discussed often and mathematically there are some reasonable directions on how to go about deciding this. I am curious to know if anyone has ignored/ignoring conventional wisdom and payed off their low interest mortgage (<5%) early? How has your finances changed since you did that? Did you regret it? Was the feeling after being mortgage free what you expected?
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          Yes. I have done so. My cash flow improved. I don't regret it. But nor did I get some awesome sensation of freedom from being completely debt-free. It was more like "Check" as we ticked off one of our financial goals.

          Here's the post on it: https://www.whitecoatinvestor.com/were-debt-free/

          It comes with a cute video of the kids.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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          • #35


            If Im retired I wouldnt mind a smaller home base and just free to roam wherever, not stuck in one spot until the body makes me. Maybe not owning any home at that time. I’d be fine in an apartment..
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            That is absolutely my goal. When we retire, and the kids are off, I would like to sell the house, get rid of most of the crap, reduce the local footprint (or move the home base entirely, to a smaller footprint) and spend chunks of time in various places. I have spent the last few years selling the idea to my wife, and I think she is coming around.

            As we start our 20th year living in the same house, I realize that it has become an albatross, and I am looking forward to the day that I unload it upon someone else. Property tax, insurance, upkeep, lawn/landscape, playing whack-a-mole with things that need to be fixed/replaced, cleaning, etc. all wear you down over time-- physically, emotionally, and financially.

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            • #36
              We spent about 3.5 years making extra mortgage payments each month, until last month. I think I finally heard Zaphod's rants enough( ;-) ) that it sank in and I decided I should be investing in the market with the extra money (early career attending). I also finally realized that with the crazy appreciation in our area, I had nearly as much in equity in our home as invested in the market and that just doesn't make a lot of sense at this stage of the game. I wouldn't say I regret making those extra payments but maybe those dollars could have been put to better use (when viewed from 30 years of growth in the future). I'll see how this feels this year and then decide what to do in the future.

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              • #37
                We're into our 6th house. We've financed 15 yr in high interest regimes and low interest regimes. I haven't got a crystal ball and can't predict what the market will yield year to year so anytime we had unpaid for property we made a point of paying off 15 year note in 2-3 years saving us several 100K over life of note, obviously more in early -mid 90s, less in last decade. YMMV

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                • #38
                  When this soon-to-be longest  bull market in history comes to an end ( and it will come to an end eventually, although perhaps not for a few more years )  many here who are extolling the virtues of investing on margin by maximizing their mortgages will be sorry.   I'm not saying that they are wrong, but many, if not most, posters here have only known a bull market.  That makes everyone here think that they are brilliant investors.  I also think I'm smarter than I really am.  We will feel otherwise when the market turns.    So, lets revisit this topic in a few years, when the market has fallen by 50%.  I expect that there will be far less enthusiasm for investing on margin when that happens.

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                  • #39




                    When this soon-to-be longest  bull market in history comes to an end ( and it will come to an end eventually, although perhaps not for a few more years )  many here who are extolling the virtues of investing on margin by maximizing their mortgages will be sorry.   I’m not saying that they are wrong, but many, if not most, posters here have only known a bull market.  That makes everyone here think that they are brilliant investors.  I also think I’m smarter than I really am.  We will feel otherwise when the market turns.    So, lets revisit this topic in a few years, when the market has fallen by 50%.  I expect that there will be far less enthusiasm for investing on margin when that happens.
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                    what?  the same optimists will think they can buy stocks on sale.  that's exactly the wrong time to give up the strategy. 

                     

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                    • #40




                      When this soon-to-be longest  bull market in history comes to an end ( and it will come to an end eventually, although perhaps not for a few more years )  many here who are extolling the virtues of investing on margin by maximizing their mortgages will be sorry.   I’m not saying that they are wrong, but many, if not most, posters here have only known a bull market.  That makes everyone here think that they are brilliant investors.  I also think I’m smarter than I really am.  We will feel otherwise when the market turns.    So, lets revisit this topic in a few years, when the market has fallen by 50%.  I expect that there will be far less enthusiasm for investing on margin when that happens.
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                      For the people its aimed at, those in their first several years of their career, not only does it not matter, but would be a blessing.




                      We’re into our 6th house. We’ve financed 15 yr in high interest regimes and low interest regimes. I haven’t got a crystal ball and can’t predict what the market will yield year to year so anytime we had unpaid for property we made a point of paying off 15 year note in 2-3 years saving us several 100K over life of note, obviously more in early -mid 90s, less in last decade. YMMV
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                      Youve paid the mortgages early on 6 houses? Did you live in each the full term or rent them out after? You dont need a crystal ball too know inflation generally is positive albeit lower now than in the past, and over long enough periods so does the market.

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                      • #41
                        Really touching and insightful reminder of what's most important. Thanks @vagabondmd

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                        • #42
                          Zaphod makes really good points(as usual) as long as you disciplined enough(I think most of us on this board are) to really invest the money. I can tell you for certain that most of my close physician friends that are leveraging low interest loans(mortgage, student loans etc) are not investing the difference, unless you include buying a tesla/lake house/crazy house remodel, investing. I have a feeling that in 10 years most of them will still have large mortgage and student loans with not much of a nest egg to show for it.  I think for some people having a tangible goal, pay off mortgage/student loans, can really drive progress whereas a nebulous goal like "fill up my taxable account" sort of loses momentum after a while.

                          We did pay ours off very rapidly but always made sure to max out tax advantaged retirement accounts, HSA, 529 etc. The day I paid it off was very uneventful but I don't regret it. It was a goal of ours, we did it, and now we just invest our mortgage money in taxable accounts.

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                          • #43




                            Zaphod makes really good points(as usual) as long as you disciplined enough(I think most of us on this board are) to really invest the money. I can tell you for certain that most of my close physician friends that are leveraging low interest loans(mortgage, student loans etc) are not investing the difference, unless you include buying a tesla/lake house/crazy house remodel, investing. I have a feeling that in 10 years most of them will still have large mortgage and student loans with not much of a nest egg to show for it.  I think for some people having a tangible goal, pay off mortgage/student loans, can really drive progress whereas a nebulous goal like “fill up my taxable account” sort of loses momentum after a while.

                            We did pay ours off very rapidly but always made sure to max out tax advantaged retirement accounts, HSA, 529 etc. The day I paid it off was very uneventful but I don’t regret it. It was a goal of ours, we did it, and now we just invest our mortgage money in taxable accounts.
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                            Yes, this is the problem with us weirdos on this site. None of these choices really matter for us, and those that it really does matter for arent paying any attention to it. Go figure.

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                            • #44




                              Zaphod makes really good points(as usual) as long as you disciplined enough(I think most of us on this board are) to really invest the money. I can tell you for certain that most of my close physician friends that are leveraging low interest loans(mortgage, student loans etc) are not investing the difference, unless you include buying a tesla/lake house/crazy house remodel, investing. I have a feeling that in 10 years most of them will still have large mortgage and student loans with not much of a nest egg to show for it.  I think for some people having a tangible goal, pay off mortgage/student loans, can really drive progress whereas a nebulous goal like “fill up my taxable account” sort of loses momentum after a while.

                              We did pay ours off very rapidly but always made sure to max out tax advantaged retirement accounts, HSA, 529 etc. The day I paid it off was very uneventful but I don’t regret it. It was a goal of ours, we did it, and now we just invest our mortgage money in taxable accounts.
                              Click to expand...


                              That’s a really good point. You don’t get a letter in the mail telling you that your taxable account is “full”.

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                              • #45
                                It really is some strange perversion that people “root” for markets to decline on this forum so they can buy stocks “on sale”. Stock markets have a positive expected return when stocks go up and they have a positive expected return when they go down. You likely lost money when stocks go down, so no, this is not good.

                                Perpetuating this notion of buying stocks on sale only reinforces people’s desire to time the market. Don’t do it. Automatically deduct an amount from your paycheck each month and invest it. Don’t worry about whether the market is up or down.

                                Some of the arguments for paying down the mortgage are odd. For example, people typically don’t prepay their liabilities to improve cash flow later. Most people pay their liabilities on or around the date they are due. Paying liabilities when they are due as opposed to as soon as they are owed is an interest free loan for the time between you are obligated to pay the amount versus when you actually pay it. There is clearly some interest rate, loan amount, and loan term where it makes sense for anyone with some risk tolerance to keep the mortgage outstanding versus pay it down.

                                Keeping debt outstanding and investing versus paying it down is purely a matter of risk tolerance. If you are undecided, just do a bit of both. If you make the decision to invest rather than pay down debt and the market goes down, it doesn’t mean you made the wrong decision. No one can predict the future. If you are long term investors with many years of stable earnings ahead of you (i.e. most young MDs), you can weather market turmoil while still servicing debt. Retirees and others nearing retirement should de-risk and pay down debt since their ability to supplement their nest egg with future earnings is reduced.

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